You may wonder what assets you have to divide with your spouse or partner upon separation or divorce.
Any asset whether real estate, a business, a pension, furnishings, tools, investments or cash is or may be family property.
Debt of any kind owed by either spouse is or may be a family debt to be shared.
Assets owned by you at the time cohabitation began or assets acquired during the cohabitation, such as by inheritance for example, is potentially “excluded property”. The increase in value of all property including excluded property is shared equally upon breakdown of the relationship.
To be considered, potentially excluded property must be traceable into present assets.
Experts such as appraisers, business valuers, actuaries and accountants may be required to value property such as the family home, recreational property, the business, and pensions to determine the value of excluded property when the spouses began cohabitation and the present value. Each spouse has a right to 50% of the increase in value during cohabitation.
Often pensions are overlooked and that they may be worth as much as the equity in the family home and certainly more than most people think.
This is the most complicated issue facing family lawyers these days. Cohen Buchan Edwards can assist you to determine what is family property, what is excluded property and how you may share that property.
An Enduring Power of Attorney is a document prepared in accordance with the Power of Attorney Act, that a capable adult (the “Adult”) (at least 19 years old) uses to appoint another person, called an Attorney, to make financial and legal decisions for them. Essentially, an Enduring Power of Attorney remains in effect (or endures) if the adult becomes incapable of managing his or her affairs (Power of Attorney Act s. 30). Those considering creating Enduring Power of Attorneys should be particularly cognizant of the age requirement for an Attorney being able to act for a capable Adult. Specifically, if an Enduring Power of Attorney names as Attorney an individual who is not an adult (at least 19 years of age), that individual may not act until becoming an adult (Power of Attorney Act s. 18).
In order to distinguish an Enduring Power of Attorney from a general Power of Attorney, s. 14 of the Power of Attorney Act states that an Adult who makes an Enduring Power of Attorney must state the following in the Enduring Power of Attorney:
- Whether the Attorney may exercise authority:
- Only while the adult is capable; or
- Only while the adult is incapable of making decisions about the adult’s financial affairs, and
- That the authority of the Attorney continues despite the Adult’s incapability
The key distinction between a general Power of Attorney and an Enduring Power of Attorney is that an Enduring Power of Attorney, unlike a general Power of Attorney does not cease to be in effect if the Adult becomes incapable of managing his or her affairs. However, there are enumerated grounds through which the authority of an Attorney under an Enduring Power of Attorney is suspended or ends. S. 29 of the Power of Attorney Act provides that the authority of an Attorney under an Enduring Power of Attorney is suspended or ends:
- if the Enduring Power of Attorney is terminated,
- if the provisions of the Enduring Power of Attorney that give authority to the attorney are revoked,
- if the Attorney resigns in accordance with section 25 of the Power of Attorney Act, or
- if the Attorney
- is the Adult’s spouse and their marriage or marriage-like relationship ends,
- becomes incapable or dies,
- is bankrupt,
- is a corporation and the corporation dissolves, winds up or ceases to carry on business, or
- is convicted of a prescribed offence or an offence in which the Adult was the victim.
The Land Title and Survey Authority of British Columbia (the “Land Title Office”) often deals with Enduring Power of Attorneys, when an Attorney wishes to deal with the real property of the authorizing Adult. However, the Land Title Office often finds issues with Enduring Power of Attorney documents and accompanying applications which cause them to reject registrations of Enduring Power of Attorneys to deal with the real property of the authorizing Adult. In essence, if the Enduring Power of Attorney does not meet the requirements of the Land Title Office, it will be ineffective for purposes related to real property. For example, defective Enduring Power of Attorneys cannot be used to sell, purchase, mortgage or otherwise deal with real property.
Some of the common mistakes the Land Title Office sees in Enduring Power of Attorneys are as follows*:
- The Attorney fails to sign the Enduring Power of Attorney.
- an Attorney is required to sign the actual Enduring Power of Attorney. This requirement is not met if the Attorney only executes the supporting documentation, such as a “proof of age” declaration.
- Information related to an alternate or substitute Attorney on the application is missing. For example, the application often does not
- list the triggering event that authorizes the alternate Attorney to act; or
- include the proof of age of the alternate Attorney.
- Extra-jurisdictional certificates are not provided with an Enduring Power of Attorney that was prepared outside British Columbia. Further, often these extra-jurisdictional Enduring Power of Attorneys fail to reference the BC Power of Attorney Act and does not include the Officer Certification Statement required under Part 5 of the Land Title Act.
These mistakes will result in the Enduring Power of Attorney being rejected for registration at the Land Title Office, and thus useless for land purposes.
For inquiries on this topic, please contact one of the lawyers from our Real Estate Group at 604.273.6411.
The division of family property in British Columbia changed in 2013 with the enactment of the Family Law Act.
The scheme of our new act is that all property that an individual brings into a marriage (which includes a common-law marriage of at least two years) is “excluded property”. The increase in value of all assets during cohabitation including excluded assets is shared equally unless a court orders an unequal division of family assets under section 95 of the Family Law Act. An unequal division is extremely rare and is only done where a court decides that it would be “significantly unfair” to divide assets equally.
The value of the excluded property when it was brought into the relationship would normally be paid back to the individual who brought it into the relationship “off the top” at its original value upon breakdown of the relationship. In theory, if you sold a home for $100,000 10 or 15 or 40 years ago and invested that as a down payment in a new family home then you would receive $100,000 upon division of assets today.
Excluded property would include assets that either spouse had when they began cohabitation or assets that they brought in during the relationship by way of inheritance or windfall. It may include a home, an investment, an RRSP or contribution to a pension.
The scheme is not as easy as it might sound. You have to prove that you brought in the asset and trace it to an existing asset. Proving that an asset existed 15 or 20 or 40 years ago can be very difficult as documents may no longer exist. For example, obtaining bank documents or RRSP statements may be impossible unless someone has retained the paperwork. Valuing the asset 15 or 20 or 40 years ago can be just as difficult. For example, you may be required to obtain a historical appraisal of real estate. Tracing the asset means that you have to show that it was used to acquire an asset such as a home or an investment, or paid down a debt on an asset such as the mortgage on a home. You have to show that that asset still exists in some form today.
If the excluded asset was used to pay down credit cards or go on a holiday it is lost. You cannot seek compensation for your contribution unless it still exists.
Determining potentially excluded assets is one of our biggest headaches in family law today. The law is changing almost daily as a result of how judges are interpreting the Family Law Act. If an excluded asset was put in the name of the contributors spouse alone, the exclusion may be lost. If an excluded asset is put into joint names it may or may not be lost depending on how the courts rule in the future.
It is safest to retain assets that you bring into a relationship in your name alone in order to ensure that the exclusion is not lost. This is difficult to do in any relationship and may be totally impractical. To clarify what you as spouses want you should have this discussion now and create a marriage agreement or a cohabitation agreement while you are still on good terms. This is good practice and good planning just as doing your will and saving for your retirement is.
Garth Edwards is a partner with Cohen Buchan Edwards and has practised family law for 33 years. Garth may be contacted at email@example.com or 604.273.6411.